Clarity on Buybacks? MI in the Age of HARP; High Level Mortgage Jobs

Here we are on the day that teenagers everywhere in the Northern Hemisphere
despise: the solstice. The sunrise in Nome is around 4:19AM. Even here in Ft.
Lauderdale, at the Mortgage Bankers Association of Florida conference, sunrise
is at the 6:29 (88 degrees and rain, by the way) – that’s darned early. Savor
it, ‘cuz we start losing daylight from here on out

The sun doesn’t determine buybacks. They generally flow from the agencies, down
through the aggregators, possibly to the smaller lenders – and many of the
worries in lending are caused by the uncertainty of the whole thing. But financial
stocks rose Tuesday after the FHFA said they were revising guidelines that
could reduce lenders’ risks of kickbacks
: it was working with Freddie and
Fannie to “provide lenders a higher degree of certainty and clarity
around repurchase exposure and liability as well as consistency around
repurchase timelines, incentives and remedies.” Here’s the story.

I have been retained to help in a search by a large Irvine-based
California Mortgage Banker that is seeking an Executive Vice President of
Retail Sales to oversee the expansion of its corporate retail sales
division and regional branch offices.  Rated as one of America’s Top 100
Mortgage Companies in 2011 by volume, the company is committed to its steady
expansion.  Reaching out to consumers nationwide from a central location
in Orange County, the company has grown to be an industry leader in both the
purchase and refinance markets for FHA, VA, Conventional, HARP2 & Jumbo
Loans. If you know someone who is interested, please have them send their
resume to me at rchrisman@robchrisman .com.
(I am at the Florida MBA conference, so please excuse any delays in
responding.)

And in Northern California, Redwood Trust is seeking experienced
underwriters to support its growing jumbo conduit. “Thus far in 2012
Redwood Trust, a Real Estate Investment Trust (REIT) has created 3 private
label securitizations and is a leader in bringing liquidity back into the
private investor market.”  The Due Diligence Underwriter will
coordinate and manage due diligence credit and compliance reviews with lenders
and 3rd party vendors, render decisions on credit exceptions, and manage
relationships with external business partners, primarily lenders selling loans
to Redwood.  Successful candidates will have years of experience in manual
underwriting, in-depth knowledge and experience with agency product,
demonstrated ability to communicate effectively to both internal and external
customers, and be eager to take on increasing responsibilities over time. 
All inquiries will be kept strictly confidential and complete details can be
found here.

Many loans gradually pay off (remember that word, amortize?) and the
mortgage insurance situation changes. A while back Luke from Minneapolis wrote,
“Hi Rob, I found a very good tool to use to find out when the MI is
supposed to drop off based on the amortization time line from the Mortgage
Insurance Companies of America’s website.
If the loan being refinanced was a purchase you can just put in the purchase
price for the appraised value otherwise you need the borrower to provide their
old appraisal if it was a refinance. You cannot get rid of MI by paying down
principle if values are declining, I have had numerous customers experience
that, but by law it is supposed to drop off based on the amortization time line
based on LTV, rate and payments.  I was not aware of this and did some
research after your Monday commentary and found out that I have a loan that I
could close this week that should have the MI removed based on this
calculator.  I am in contact with the servicer and can hopefully have it
taken off prior to closing, saving the borrower over $5,000 in MI
premiums.” Thanks Luke.

And Ken P. from Washington wrote, “If a client was on an 85% LTV
loan taken out 4 years ago, they are going to be pretty close to the 78% PMI
elimination point based on the original appraisal. If the homeowner pays down
the balance to 78% and gets the PMI removed under the Homeowners Protection Act
– they can then qualify to do a HARP refinance without PMI (even if the
appraisal shows that they are underwater).   Once the PMI coverage is
cancelled there is no policy to renew and just like a borrower that had 20%
equity doesn’t require PMI, they will not require PMI because they have met the
requirements based on their original loan obligation. So I am counseling
clients that have PMI and are within reach of that 78% mark to look at making a
principal reduction to get their PMI removed so they can get the maximum
benefit from the HARP program.” Thank you Ken.

It is time for some agency/investor/MI/bank closure updates. These
recent bullet points should give you a flavor for what is going on out there,
although it is always best to read the actual bulletin.

First, due to an unforeseen scheduling issue, the M&T Bank FHA
Streamline Conference Call has been postponed.  Approved lenders are asked
to contact their AE with any specific issues.  If you are not currently
approved to do business with M&T Bank, please go to www.mtbcl .com for Correspondent Lenders or mtbwholesale .com for Wholesale
Brokers to get signed up – at this point M&T is standing pat on its FHA
Streamline policy.

Unfortunately
in recent weeks the guys and gals at the FDIC, and the related organizations
that assist in these matters, have been busy
. Waccamaw Bank (NC) was
closed, and the deposits transferred to First Community Bank (VA). The checking
accounts of folks at Shabbona, Illinois’ Farmers and Traders State Bank will
now say First State Bank, also of Illinois. Depositors at Carolina Federal
Savings Bank (SC) are now part of the Bank of North Carolina family. And in
Oklahoma the owners of F&M Bank in Edmond said “welcome aboard”
to the customers of First Capital Bank.

Five days ago regulators closed Tennessee’s Farmers Bank of Lynchburg and
sold it to Clayton Bank and Trust. In Georgia Security Exchange Bank was sold to
Fidelity Bank; Fidelity obtains 2 branches, all of the deposits and entered
into a loss-share transaction on $102.8mm of assets (68%). And here in Florida Putnam
State Bank was sold to Harbor Community Bank with Harbor obtaining 3 branches
and assuming all of the deposits and entering into a loss share transaction on
$112.3mm of assets (66%).

The holding company for First Tennessee Bank (First Horizon National
Corp.)
is reportedly being accused of accepting kickbacks from mortgage
insurers in a proposed class-action lawsuit filed in PA. The suit alleges home
loan customers were referred to four insurance companies that paid reinsurance
subsidiary referral kickbacks.

In Kansas Legacy Bank ($257mm) will acquire Alliant Bank ($15.3mm) for an
undisclosed sum. And MidSouth Bancorp ($1.4B, LA) will buy two branches from
Hancock Holding ($19.4B, MS) for an undisclosed sum.

New
Freddie guidelines are in effect for cash-out transactions, whose proceeds may
not be used as reserves
.  Amended guidance on trade equity states that
the net proceeds of the trade-in of the borrower’s previously owned home are
now permitted for purchase transactions.  The proceeds, which should be
documented by an appraisal of the previously owned residence as well as a copy
of the trade-in contract, are determined by subtracting any outstanding liens
and any transfer costs from the lesser of the appraised value of the property
or its trade-in price as listed on the contract.

Freddie has also issued updated guidance on rent credits stating that any of
the borrower’s prior rental payments are allowed to be credited towards the
purchase price.  The payments may be used as Borrower Personal
Funds.  The amount of credit towards the down payment is calculated from
the difference between the market rent and the actual rent that was paid over
the previous 12 months, the former of which is determined by the property’s
appraiser.  In such circumstances the loan file should include a copy of
the rental/purchase agreement and copies of the borrower’s canceled checks or
money order receipts from the past 12 months to serve as proof of the rental
payments.

Just as a reminder, FinCEN’s  August 13th deadline for implementing an
Anti-Money Laundering Program and filing suspicious activity reports is fast
approaching
.  Non-bank residential lenders and originators are
required by the Bank Secrecy Act establish a program that includes written AML
procedures, internal AML controls,  a designated AML Compliance Officer,
ongoing training, independent testing, and SAR controls.

Wells
Fargo Correspondent
has updated its Mandatory and Best Effort options
in an effort to simplify pricing and provide more options for government loans. 
When locking Best Effort FHA, VA, and Guaranteed Rural Housing loans, sellers
no longer have to select either GNMA I or II, as the Wells Funding website will
display only one government price.  Mandatory commitments should still be
registered as either GNMA I or II, however.  Interest rates on FHA and VA
15-year fixed loans are now permitted in increments of 0.125% instead of the
previous 0.5%.  Wells’ High Balance FHA Loan Program has also been
enhanced to allow 15-year fixed rate and 5/1 ARM transactions, while 30-year
fixed rate transactions may include amortization terms of 240-360 months.

The Wells Fargo Funding Market Classification List has been updated and is
available in the Client Tools section of the website
The Authorized eSignature and eDelivery Vendors list (Exhibit 22) has been
updated as well and now lists CSi as approved for both electronic signatures
and delivery and updated contact information for DocuSign®.

The National Reverse Mortgage Lenders Association will be hosting a news
conference call at 1PM EST on June 21st to announce its “Borrow with
Confidence” public education campaign. Dial (412) 317-6789 to call in.

Mountain West Financial is offering a webinar on down payment assistance
programs that will take place on June 21st.  Interested parties can register here.

Yesterday
was a relatively quiet day in the markets
– in fact MBS prices were
nearly unchanged. The U.S. Census Bureau and the Department of Housing and
Urban Development reported that permits for the construction of new
privately-owned residential construction jumped 7.9% in May. But Housing Starts
fell by 4.8%. Slice and dice and pick apart the number however you see fit, but
Starts are 26% higher than where they were a year ago. And the trend in permits
appears to be more unambiguously positive.

The 10-yr closed at 1.62%, where it has hovered for quite some time, but
that could change later today as we hear the FOMC decision and whether they
will ease or not. Ease more? Heck, overnight rates are already at 0%. The
smartest guys in the room really don’t expect much out of the Fed, and most
likely they will disappoint all expectations and simply tell us that they will
continue to be ready to ease if economic data continues to weaken. For interest
there is a press conference afterward by Chairman Bernanke – all that happens
after 2PM EST (11AM PST). In the very early going the 10-yr is sitting at
1.63% and agency MBS prices are where they were Tuesday afternoon.

(There has to be some mortgage banking analogy with this clever oldie.)
A young boy enters a barber shop and the barber whispers to his customer,
“This is the dumbest kid in the world.  Watch while I prove it to
you.”

The barber puts a dollar bill in one hand and two quarters in the other,
then calls the boy over and asks, “Which do you want, son?”
The boy takes the quarters and leaves the dollar.  “What did I tell
you?” said the barber. “That kid never learns!”
Later, when the customer leaves, he sees the same young boy coming out of the
ice cream store & says, “Hey, son!  May I ask you a question? Why
did you take the quarters instead of the dollar bill?”
The boy licked his cone and replied, “Because the day I take the dollar,
the game’s over!”

 

…(read more)

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